Compensation Exam - Due Friday

variable pay may also be called

Incentive pay or commission

do most managers read research in HR management and compensation journals?

NO

Incentives do not permanently increase labor costs because

They are based on performance and have to be rewarded each period; not reoccuring

Which of the following policy decisions directly affects employees' attitudes and work behaviors

employee contributions

The difference between exchange value and use value surfaces when _______________________

one firm acquires another

The role non-HR managers play in making pay decisions is called _________.;

ownership.

When organization performance declines:; Research shows that ________ will effectively shift an organization in a downward performance spiral into an upward one

pay plans do not pay off

A compensation strategy should reflect an organization's ____________;

pay model; needs, trends in external market, competitors pay

Human capital

when skills and experience add value, more pay is commanded

Know the steps in developing a total compensation strategy and their correct order

Assess total compensation implications: HR, business strategies, culture/values, employee needs o Map a total compensation strategy: alignment, objectives, competitiveness, contributions, and management o Implement strategy o Reassess: realign as conditions and strategy changes

what do objectives guide

Efficiency, fairness, compliance, and ethics

Comparisons based on the forms of compensation used by other companies are part of _________.;

External Competitiveness

Work/life balance is most closely associated with the ________ aspect of mapping a total compensation strategy

HR allignment

if the objective is to increase customer satisfaction what forms of pay might you use

Incentives and merit pay

correlation coefficient

a common measure of association that indicates how changes in one variable are related to changes in another

________ is the key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy and handle greater decision-making responsibilities

compensation

Which form of pay does NOT permanently increase labor costs

incentives

An organization whose profits or market share is increasing is able to pay ___________

larger

factors that shape internal pay structures

produces flatter wage rate structure because legislation aims at differentials

A structure based on value typically ranks jobs on __________.;

value typically ranks jobs on skills required, complexity of tasks, problem-solving, and responsibility

Know which of a number of statements is true of incentives

Different people are motivated by different incentives

Pay structure refers to

array of pay rates for different work or skills within a single org

Internal alignment is sometimes called ____________

compensation strategy

content of a job refers to

the work performed and how it gets done

differences between merit increases and merit bonuses

A merit increase is different from a bonus because, while a merit pay increase is usually a permanent increase in someone's wages, a merit bonus is more often a one-time lump sum of money. Bonuses, while often based on merit, can also be offered company-wide based on company success during a certain period.

When cooperation is important for successful organization performance, which of the following pay structures is most suitable

Egalitarian pay structure

Joshua believes that treating employees equally will improve their job satisfaction, which in turn will increase their work productivity and performance. In accordance with his beliefs, he wants to reduce the number of job levels and the pay differentials between the levels. In this case, he is most likely to use a(n)?

Egalitarian structure

Nina is a high-performing individual who works best alone. Which of the following companies is the most appropriate for her?

Hierarchical structure

________ are related to greater performance when the work flow depends on individual contributors

Hierarchical structures

Japan and compensation

Japan and compensation have many allowances; monthly paid; start on lower end and rewarded by seniority

In the context of pay relationships, which of the following is illegal in the United States?

Legal examples: Paying on the basis of the nature of jobs; paying on the basis of pay comparisons with competitors; and, Paying on the basis of one's skill level. Illegal example: Paying on the basis of one's age, gender, religion, natural origin, and disability

James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about,

Procedural justice

; Factors used in defining equal work according to the Equal Pay Act

Small pay differentials

In the context of the impact of internal structures, which of the following statements is true

Supports organization strategy, workflow. Motivates behavior, fair to employees

Which of the following is true of internal alignment? (will list three false statements and one true one);

Supports the orgs strategy o Supports the workflow o Motivates behavior toward organization objectives o Supports fairness

Tournament theory, Equity Theory, Marginal Productivity Theory; Reinforcement Theory

TT: says all players play better when the prize differentials are larger. ET: suggests that employees judge the fairness of their pay by making multiple comparisons (jobs similar to theirs, at other employers, against other external pay levels). MPT: employers pay use value

Which of the following is a fundamental strategic choice at the corporate level?

What business should we be in?

merit pay

a reward that recognizes outstanding past performance. it can be given in the form of lumpsum payments or as increments to the base pay. merit programs are commonly designed to pay different amounts (often at different times) depending on the level of performance

Union preferences are a major factor in ________ a total compensation strategy; In mapping a total compensation strategy, the question of how important compensation is in the overall HR strategy is part of ____________.;

assesing;mapping a total compensation strategy

which of the following is often the largest component in an executive pay package?

base pay

Strategy refers to?;

basic directional decisions to its purposes and missions.

Management and HR research findings discussed in the chapter

being unaware of key research costs the org lots of money, so it pays to do the research.

employee contributions

comparisons among individuals doing the same job for the same organization

Procedural fairness

concept concerned with the process used to make and implement decisions about pay. it suggests that the way pay decisions are made and implements may be as important to employees as the results of the decisions.

The most common bases for determining internal structures are

content and value of work

A compensation system that focuses on competitors' labor costs is most closely associated with a(n) ________ strategy

cost cutter

Mich Inc., a hardware store, has a rating system in place that rates employees on their friendliness, usefulness, and product knowledge. Based on the ratings an employee receives, he or she gets an incentive. The compensation strategy followed by Mich is most closely described as a(n) _________ strategy

customer focused strategy

customer-focused strategy

delighting customers; increase customer expectations. Incentives for customer satisfaction; puts customer at center of business strategy

; Pay differences among levels in an organization are called __________

differentials

Providing unlimited compensation choices to employees would meet with ____________________ from the U.S. Internal Revenue Service

disapproval

an example of a relational return

ecognition and status, employment security, challenging work, opportunities to learn, personal satisfaction from successfully facing new challenges, and teaming with great co- worker

In firefighting and rescue squads and global software design teams, a(n) ________ structure is most closely associated with higher performance

egalitarian structure

Marginal productivity theory

employers pay use value.

potential problem(s) in egalitarian pay structures

equal treatment means high performers feel underpaid & they may quit or change their behavior

fairness perceptions

equity; ensure fair treatment by recognizing employee contributions and employee needs

Relationship of exchange value to use value

exchange value- wage the employer and employee agree on. Use value- value of goods/services an employee produces in a job

cost-cutter strategy

focus on efficiency and minimize cost.

Entitlement

for being an employee, an incentive to decide to take/stay in a particular job and invest in you performing well in the job

Egalitarian pay structures

have fewer levels and/or smaller differntials

Egalitarian pay structures have all but which of the following characteristics?;

have the following characteristics: fewer levels, small differentials, support a loose fit, teams work org, cooperation, equal treatment

A high-performance system

help companies decentralize decision- making to increase profit and performance

Troubled Asset Relief Program:

helped prevent a second great depression, stabilize a collapsing financial system, and restart the markets that provide mortgage, auto, student and business loans. Restart economic growth and prevent avoidable foreclosures

The problem that is most likely to be faced by organizations using an egalitarian pay structure is

high performing employees may feel underpaid and quit

relationship of changes in federal compensation laws and changes to pay systems

if the federal law is above your wage, you have to increase your wage.

Research investigating high-performance workplaces found that performance-based pay ________ when combined with other high-performance practices

improves attitudes and behaviors

if a company wants to restructure its pay plan without increasing labor costs in the long run and while retaining its top employees which of the following examples would be the best strategy?

increase incentive pay; decrease base pay

Declining organization performance __________ the risks facing employees—risks of still smaller bonuses, demotions, wage cuts, and even layoffs; and, virtuous cycle.

increases

A major challenge in the design of future pay systems is how to better satisfy _________________________

individual needs and preferences

A compensation system using market-based pay is most likely to be part of a(n) ________ strategy

innovator

Flexible-generic job descriptions would most likely be used with a(n) ________ strategy

innovator

Career growth, hierarchy, and flexible design are most closely associated with the ________ aspect of mapping a total compensation strategy

internal allignment

Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?

internal allignment

All organizations that pay their employees have a compensation strategy even though __________________________;

it may or not be written

the work to be performed, and the skills/knowledge required to perform the work

job content

Compensation is often a company's _________ controllable expense;

largest

Organizations design their pay structures around _____________

levels, differentials, and criteria used to determine differences

Influence of unions on pay decisions

little impact

Organizations in a turbulent and unpredictable environment requiring flexibility in jobs and work processes are likely to be more successful with a(n) ________ internal pay structure

loosely coupled

; Greater pay dispersion is related to __________ turnover among executives

lower

Issues of transparency, technology, and choice are most closely associated with the ________ aspect of mapping a total compensation strategy

management

reasons why the great majority of the uninsured in the United States are from working families

many small employers are much less likely than larger employers to offer health insurance to their employees

Based on the opinions of 10,000 U.S. workers, Hudson found that when given their choice of unconventional benefits, most employees would select __________.;

more flexible work schedule.

According to the Hudson survey, which of the following is the single thing that would make 41 percent of U.S. workers happier?;

more money

innovator strategy

new product; short life cycle and increased product complexity. Less emphasis on evaluating skills; more on incentives

Common bases for modern pay structures include all but which of the following

number of levels, pay differentials between levels, content of work performed, value of the work, job.

Commissions

payment tied directly to achievement of performance standards. commissions are directly tied to a profit index and employee costs

Trying to measure an ROI for any compensation strategy implies that _________;

people are human capital like other factors of production.

Most job structures are best described as

person or job based structure

The institutional model

predicts that very few firms are first movers but instead copy innovative practices

differentiated strategy

providing innovative products at premium prices;

Transparency, prominence

refers to openness and communication about pay

R2

regression analysis; collecting, exploring of data to define underlying trends

Embedding compensation strategy within the broader HR strategy affects _________.;

results.

In a strategic approach to pay, internal alignment is the ________ issue to be decided (refers o order of issue to be decided according to the text)

second

?; Compensation strategy, HR strategy, and business strategy ultimately __________________________

seek to decrease costs and increase revenue

In the context of internal structures, which of the following is true of a delayered structure?

simplify the layers already there

Characteristics of aligned pay structures

support the way work gets done, fit the orgs business strategy, more likely to lead to success

The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) ________ internal pay structure

tailored

Jacob works at PrimeClean Corp., a car wash company. He is asked to follow a set of instructions in a predetermined order to wash a car. All the details including the amount of washing liquid to use for each type of car are clearly specified. In this case, Jacob's company is most likely to use

tailored pay structure

Whole Foods' shared-fate philosophy; How an organization positions its total compensation against its competitors is part of _____________________ strategic choices;

team members have the responsibility for their own successes and failures

Which of the following tests of competitive advantage is probably the easiest test to pass

the alignment test

Base wage

the basic cash compensation that a employers pay for the work performed. tends to reflect the value of the work itself and ignore differences in individual contributions

incentive effect

the degree to which pay influences individual and aggregate motivation among employees at any point in time

sorting effect

the effect that pay can have on the composition of the workforce. different types of pay strategies may cause different types of people to apply to and stay with an organization

internal alignment

the pay relationships among jobs or skill levels within a single organization ;focuses attention on employee and managements acceptance of those relationships. it involves establishing equal pay for jobs of equal worth and acceptable pay

external competitiveness

the pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships

Which of the following theories predicts that individual performance will be maximized when the pay differentials between job levels are large?

tournament structure

An organization defines its strategy through?

trade-offs and choosing what and what not to do.

Technology used in producing goods and services influences the _________________,

work design,

Content refers to the:;

work performed in a job and how it gets done